New Bankruptcy Threshold Of $20,000: Impacts On Sme Directors And Business Finances


The Australian government plans to increase the bankruptcy threshold from $2,000 to $20,000. This change, introduced by Attorney-General Mark Dreyfus, aims to help small and medium-sized businesses. Small business directors often face financial troubles, and the current limit is considered too low. Many believe the raised threshold will offer these businesses much-needed reprieve.

Mark Dreyfus highlighted that the current threshold has not been adjusted for almost 15 years. This increase is particularly relevant in the context of the lingering effects of the COVID-19 pandemic, which has severely impacted the financial stability of numerous businesses.

The Small Business Ombudsman, Bruce Billson, expressed support for this initiative. By raising the threshold, it is expected that directors will have more time to manage and reorganize their financial affairs without the immediate threat of bankruptcy.

However, not everyone agrees with this change. Some argue that it could potentially harm creditors who are owed thousands of dollars. They worry that businesses might take advantage of the higher limit without addressing their debt obligations promptly.

According to the Australian Securities and Investments Commission, there were several instances where the low threshold led to unnecessary bankruptcies. These cases often resulted in long-term negative impacts on the business owners’ lives and livelihoods.

Observers believe that the new threshold will balance helping businesses and ensuring creditors get paid. While the increase might relieve some immediate pressure from small businesses, it is essential to monitor its long-term effects on both debtors and creditors. This adjustment reflects the government’s commitment to supporting the recovery of the Australian economy.

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